State audit claims lab overcharged $24 million

Medicaid billed more than necessary and should be repaid, state says. Company calls it a ‘shake down’
Credit: (Screengrab from NJOSC/YouTube)
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A Long Island lab is being asked to reimburse New Jersey’s Medicaid program almost all of the $25 million it was paid for drug testing work over nearly four years after a state watchdog agency found it vastly overcharged for some procedures, among other alleged violations.

Truetox Laboratories LLC called it an “unjustified penalty” and “an abuse of oversight” and said it plans to appeal the results of the audit by the New Jersey Office of the State Comptroller, according to a statement the company’s attorney provided NJ Spotlight News Friday morning.

The comptroller’s audit, released Wednesday,  claims Truetox Laboratories LLC overbilled the program more than $24 million between January 2015, when it began conducting urinalysis and other testing for the public insurance program, and July 2018. Truetox is one of the Medicaid program’s highest-paid laboratory services, collecting fees that ranged between less than $1 million to more than $12 million annually, according to the comptroller’s office.

The audit is the first public report related to a multiyear investigation of Truetox by Medicaid regulators in the comptroller’s office, who are charged with rooting out fraud, waste and abuse within the $19 billion program — a mix of state and federal dollars — that provides health insurance for nearly 2 million low-income New Jerseyans.

Lab contests state comptroller’s report

Truetox contested the comptroller’s claims in an unusually spirited 25-page rebuttal from its attorneys that was included in the audit report. The attorneys contend the audit is based in part on erroneous previous findings and that the comptroller blocked their efforts to self-disclose some problems and inflated the requested reimbursement just to “shake Truetox down.”

In the statement Friday, attorney John Leardi from the Princeton-based firm Buttaci, Leardi and Werner said the company discovered an error in its billing software in 2018, which it corrected immediately and disclosed to the state. He also claimed Truetox was not overcharging Medicaid, but merely providing legal discounts to other, uninsured patients.

According to the comptroller’s audit, Truetox charged New Jersey Medicaid as much as $1,500 for a drug-screening protocol that other clients had paid $3 to obtain, leading to millions of dollars in overbilling. Many tests also did not include the proper patient details or paperwork, auditors found, resulting in additional overpayment. Auditors found errors in roughly eight out of 10 claims they reviewed and calculated the reimbursement by spreading that ratio over the total number of claims — nearly 360,000 — the company processed during those years.

“Laboratories are prohibited from charging Medicaid one price and others a cheaper price in order to keep taxpayers from getting fleeced when others are getting a more favorable rate,” said Acting State Comptroller Kevin D. Walsh, explaining that Truetox’s pricing scheme violated this law.

Addressing NJ’s opioid crisis

“Adherence to this rule is especially important given New Jersey’s ongoing opioid crisis,” Walsh said. “By our office recouping these funds, more money will go back to the Medicaid program which will in turn provide more services for this population in suffering.”

State reports show drug-related fatalities are rising again, with more than 3,000 New Jerseyans dying of an overdose in 2020 and another 1,100 deaths recorded between January and May — a rate that officials said outpaces anything seen in years. Experts agree that the impact of the pandemic — including grief, loneliness and economic fallout — is fueling growing levels of substance abuse, which led more than 70,000 New Jerseyans to treatment annually in recent years.

In their response to the audit, Truetox attorneys said they were “disappointed, but not surprised” by the comptroller’s findings. The company — which conceded some errors — claims many of the state’s charges are without merit and said the way the comptroller’s office calculated the overpayment was erroneous, among other inaccuracies.

What next?

“The conduct of this audit smacks of bad faith: you and your team have no interest in a true ‘audit’ of Truetox’s claims to NJ Medicaid. Instead, you are trying to shake Truetox down for as much as you can,” Leardi wrote in his audit response. The company can contest the audit’s findings through the state’s Office of Administrative Law.

“We look forward to being heard on appeal,” Leardi said in the statement provided Friday, following the publication of an earlier draft of this story. “This unjustified penalty for providing legal discounts that uninsured patients need to receive treatment is bad policy and an abuse of oversight.”

In addition to calling for the $24.1 million reimbursement, the comptroller’s audit includes nine other recommendations designed to ensure against future overcharges to Medicaid, encourage better documentation and better comply with the program rules in general.

If Truetox eventually agrees to pay, the comptroller’s office said it would work out a payment plan with the company. If not, the comptroller’s office can put a lien on anything the company owns, which enables Medicaid to withhold a portion of future payments until the debt is cleared.

Editor’s Note: This story has been updated to include further comment from lawyers for Truetox.

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